Bush's, forces the Treasury to borrow more, which lowers the national rate of saving. By the same logic, one sure way to increase national saving is for the gov- ernment to raise taxes and run a budget surplus. For some reason, conservative economists rarely mention this option. S ome of the consequences of Bush's policies are already clear. This year's budget deficit, at about 3.8 per cent of G.D.E, isn't as big as it was twenty years ago, when it reached six per cent of G.D.E, but, as the International Mone- tary Fund has pointed out, returning to a balanced budget will be even harder this time around. A decade ago, it took "tax hikes, a sharp contraction in military spending, and an unprecedented eco- nomic expansion to achieve fiscal con- solidation,,, the I.M.F. noted. None of those things are on the horizon now. The White House claims that the deficit will fall by two-thirds, relative to G.D.E, in the next five years. However, this prediction assumes that the econ- omy expands by about 3.5 per cent a year; that spending on programs other than entitlements, defense, and home- land security rises hardly at all; and that the Alternative Minimum Tax isn't cut back much. If economic growth comes in lower than forecast, government spend- ing comes in higher, and Congress sub- stantially modifies the A.M.T.-and all three are likely-the deficit will be big- ger than projected. Moreover, the White House's fore- cast extends only to 2009, when the baby boomers are due to start retiring, putting enormous demands on Medicare and Social Security: "Perhaps the biggest dif- ference between Reagan and George W. Bush tax cuts is that, with Reagan, his- tory gave us time to clean up the mess," Peter G. Peterson, who was Secretary of Commerce in the Nixon Administra- tion, writes in ills new book, "Running on EmptJ" "With George W., history may not be so indulgent." Instead of trying to build up a surplus to help pay for the retirement of the boomers, the President would cut into future tax revenues by making his tax cuts permanent. According to William G. Gale and Peter R. Orszag, two economists at the Brookings Institution, this would cost about $1 8 trillion between now and 2014. "It is the height of deception to say 76 THE NEW YORKER., SEPTEMBER 6, 2004 we can only budget till 2009 but we are going to have massive tax cuts from 2010 onward," Gale said. "That is what the Administration has done." Most people already know that Bush's tax cuts favored the rich, but the size of the giveaway was startling. Based on figures contained in a recent study from the Congressional Budget Office, it now appears that about two-thirds of the benefits went to households in the top fifth of the income distribution, and about one third went to households in the top one-hundredth of the distri- bution. To put it another way, fami- lies earning $1.2 million a year-that is, the richest one per cent in the coun- try-received a tax break of rougWy $78,500. Families earning $57,000 a year-middle-income families-got a tax cut of about $1,100. Even these numbers, though, do not convey the full ambition of the Republi- cans' agenda, which potentially involves a historic restructuring of the American system of government. RougWy two- thirds of taxable income is paid to work- ers in the form of wages and benefits. The other third goes to reward capital, or accumulated savings, in the form of cor- porate profits, dividends, and interest payments. If Bush's economic agenda was fully enacted, the vast bulk of these payments wouldn't be taxed at all, and labor would end up shouldering prac- tically the entire burden of financing the federal government. In a new book, "Neoconomy: George Bush's Revolu- tionary Gamble with Americàs Future," Daniel Altman, a former economics re- porter for the Times and The Economist, describes what such a system might look like. "The formnate and growing mi- nority who managed to receive all their income from stocks, bonds and other securities would pay nothing-not a dime-for Americàs cancer research, its international diplomacy; its military de- terrent, the maintenance of the interstate highway system, the space program or almost anything else the federal govern- ment did. . . . Broadly speaking, that for- tunate minority would be free-riders." A return to the Victorian world of rentiers and laborers may seem like an outlandish scenario, but a generation ago it would have been difficult to imagine a White House, even a Republican one, phasing out the inheritance tax, which affects only a tiny minority of the rich- est families, and slashing the taxes on dividends and capital gains, which few middle-class families pay, either. The people who devised these policies sim- ply do not accept the old rules. Glenn Hubbard, for instance, told me that the progressive income tax "discourages en- trepreneurship and risk-taking. We have to trade off our interest in fairness with those costs. I, like many conservative economists, care a lot about progressivity at the bottom. President Bush, for ex- ample, made the Earned Income Tax Credit"-a handout to low-income fam- ilies-"more generous. But progressivity at the top? I don't kno That just sounds like envy to me." Language like this won't figure prom- inently at the Convention this week, at least from the podium, but should Bush win in November it is sure to reap- pear, as the conservative institutes and right-wing lobbying groups continue to promote their agenda, which now in- cludes cutting the dividends tax and the capital-gains tax to zero, getting rid of the corporate income tax, and halving the size of federal spending, from twenty per cent of G.D. to ten per cent. "Here's the bottom line of it," Stephen Moore said. "The Republican Party is now a supply-side party. It's a tax-cut party, thanks to people like Grover Norquist and the Club for Growth. We've pushed it in that direction. It has evolved over the past forty years from being a party of Eisenhower balanced-budget Re- publicans into a party of Reaganite pro- growth advocates. "That strategy is not just better eco- nomically; it also has political benefits, because, in my opinion, nobody lost an election in the past twenty years because of budget deficits. You couldn't point to a single congressional race where a can- didate lost because of a big budget defi- cit. People might say in the polls, 'Oh, yes, I'm very concerned about budget deficits.' But does it change people's vot- ing patterns? No." .